Written by

Detroit Free Press Staff Writer

Two trustees were tapped to lead one of Detroit’s pension fund boards on Wednesday, less than two months after taking a controversial, all-expenses-paid trip to Hawaii for a conference.

Cedric Cook and John Riehl will lead the Detroit General Retirement System as chairman and vice chairman, respectively. The two of them, along with two other Detroit pension trustees, went to a Hawaiian beach resort for an educational conference in May that cost the city’s taxpayer-backed pension funds an estimated $22,000.

A spokesman for Orr declined to comment Wednesday on the General Retirement System’s new leadership but said Orr remains concerned about whether the pension boards are taking Detroit’s financial crisis seriously and managing the funds prudently.

“He still continues to have those concerns. It doesn’t matter who is chairman of that organization,” Orr spokesman Bill Nowling said.

The Hawaii trip was one example of pension-fund management that spurred Orr in June to order an investigation into fraud and corruption of the the city’s employee benefits programs and its two pension funds, the General Retirement System and the Police and Fire Retirement System.

“We think that spending $20,000 to fly a quarter-way around the globe to attend something that they could get online is not a good use of public funds — especially pension funds,” Nowling said when the investigation was ordered. “And we want to ask the question, ‘What other bad decisions have been made?’ ”

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Pension officials agreed to cooperate with Orr’s investigation but have questioned its usefulness, considering an ongoing federal investigation of the funds. They also dispute Orr’s claims that the retirement systems are underfunded, citing studies that use widely accepted actuarial standards.

Orr, however, has said the funds are underfunded by $3.5 billion. He said the pension funds have distorted their values with overly optimistic expectations of investment returns.

As a result, cuts to retirees’ pension benefits are on the table as Orr continues to negotiate with the city’s creditors to avoid a municipal bankruptcy. Orr is scheduled to meet with pension officials Wednesday to discuss possible changes, including freezing employee pensions for current workers and moving new workers and some who are not vested in pensions — workers who’ve been on the job fewer than 10 years — into 401(k)-style retirement plans.

The retirement systems, funded by contributions from workers and the city, have combined assets valued at more than $5 billion and provide benefits to about 20,000 retirees and beneficiaries.

Orr’s authority to remove pension trustees will depend on an actuarial report on the funds’ financial health. Orr can remove one or more trustees if the report — expected as early as next week — shows the funds are less than 80% funded.

Cook, the new chairman, said he’s not concerned about Orr’s reaction to his new role.

He defended his attendance at the six-day conference in Hawaii, put on by the National Conference on Public Employee Retirement Systems, which calls itself the largest trade association for public pension funds.

“Something that we have to do as part of our duties is get educated,” Cook said after Wednesday’s meeting.

Pension trustees did not vote on Cook’s new role as chairman. Cook previously served as vice chairman, and that person traditionally becomes chairman when new leaders are selected. Cook replaces Thomas Sheehan as chairman.

Riehl declined to comment after the meeting. “Talk to the boss,” he said as he walked by without stopping.

Riehl and Cook, both elected trustees, were joined in Hawaii by Police and Fire Retirement System trustees Angela James and Edsel Jenkins, both of whom are mayoral appointees.

The final cost of the Hawaii trip has not been determined, said Cynthia Thomas, executive director for both funds. The attendees turned in their travel receipts, but they are under review, Thomas said in an e-mail.

Detroit’s pension fund boards have a combined 25 trustees — nine for the general system and 16 on the police and fire board. The General Retirement System’s elected and appointed citizen trustees are eligible for a weekly meeting stipend between $67 and $200, and elected active employee trustees are eligible for a quarterly service stipend between $833 and $2,500.

The general system’s ex officio trustees are not eligible for the stipend, and the Police and Fire Retirement System trustees are not paid a stipend.